New Delhi, Feb. 28: The government today eased the overseas investment norms for companies while allowing prepayment of foreign loans over $ 100 million and promised to announce more initiatives to ease the flow of funds. To enable diversification, overseas investment under the automatic route will be permitted to companies with a proven track record, even where the investment is not in the same core activity.
Presenting the Union Budget for 2003-04, finance minister Jaswant Singh said, “The current restriction limiting such investment to 50 per cent of the net worth of the company will now be raised to 100 per cent.”
The move is a part of the ongoing effort of the government to ease capital account mobility. The government also lifted the $ 100 million ceiling for companies willing to prepay external commercial borrowing (ECB) dues under the automatic route.
The government is already considering a major review of sectoral limits of investments by FIIs. In order to facilitate their easy entry into stock markets, the process of their registration will be further streamlined.
A senior financial analyst with IFC said, “This is a good move. Till a few years back, the government had not encouraged ECB, only a few companies in oil business had borrowed money from outside and the repayment will not impact the governments reserves.”